Entrepreneurship in the slum - 5 lessons from a flip-flip business

A few weeks ago a young woman who grew up without parents in a Cambodian slum approached me for a loan of $1000.

I've known her for years. She is almost illiterate, can barely add two numbers together, and struggles to calculate her daily profits. 

But she can sell upwards of 100 pairs of flip-flops in a few hours!

Now that's hustle.

So, I gave her the loan, as well as a lesson in budgeting and calculating profit. She's already paid me back $500. 

Every now and then, a successful white American entrepreneur puts out a list of "10 Ways the Rich Think Differently". Or "5 Things the Successful Teach their Children that the Poor Don't".

In fact, I got one of these in my inbox from Michael Hyatt this morning: "How to Raise Kids who Understand Wealth Building". Michael writes that, "a new study about why wealthy parents tend to have kids who also grow up wealthy confirms that nurture is the biggest factor."

I like Michael Hyatt. But like many wealthy, white Americans he has zero concept of privilege. He assumes that rich people have successful kids because they taught them well. And by inference, poor people are poor because they don't have the right attitude, or approach to life. 

He completely ignores the networks, connections, education and other resources that provide a huge step up for his daughters. You see, the difference between rich and poor is not just in the mind, it's in the environment. It's time we gave people in poverty more credit.

In the slum, there is no less hard work (probably a LOT more - I know many of them work much harder than I do). There are no fewer parents trying to teach their children to survive. There is no less hustle.

So, here are a few things to keep in mind about entrepreneurship in the slum.

This is my alternative list, to counter all those lists that promote the idea that the rich are successful simply because they are smarter and harder working. I'll call this list, "5 Hard Truths the Poor Teach their Children"...

Lesson #1: Risk is Real - too real

I know that if I got into financial trouble I could turn to a number of people for help (I wouldn't want to, but I could if I had to). Folks living in poverty just do not have the same network of contacts with resources. They might not have a single person in their circle of family or friends who has any money to spare. So, the risks involved in entrepreneurial activity are very real. One wrong move could be devastating, especially if you have children or other dependents relying on you for food every day.

So, let's celebrate when we do see those who take risks despite the high likelihood of failure (like getting on a boat and trying to get to another country to find more economic opportunity).

But also, let's not be too quick to condemn or look down on those who are quite rightly extremely risk-averse. The risk for them is much higher.

Lesson #2: Creativity is Stifled 

So, how does that heightened level of risk play out for the poor? It means sticking to what you know works. It means not taking a gamble on this or that clever idea. It means doing what everyone else is doing. Not standing out. Not experimenting. Not doing anything new, unless it's proven. 

And it also means you have to come up with a way to feed your family right now, today.

In my experience, creativity usually comes when I have some space to think and dream. I'm not selling my poor friends short. They also have dreams and ideas. They are no less creative than I am. But the pressure of having to get money that very day, often squeezes those opportunities for creativity out.

So, how can we create more space for creativity for people on the margins, while recognizing that there is a very real need to have daily needs met?

Lesson #3: Confidence is not Universal

It's hard to explain the confidence I grew up with as a privileged white male. I just knew, from a young age that people would treat me with respect. Even today, when I go into a bank or government office, I am treated with R-E-S-P-E-C-T. No-one chases me out or tells me off or follows me around like I might be a thief. I can even get mad and raise my voice, and people STILL treat me with respect. It's ridiculous (but kinda nice).

But we make a big mistake if we think that everyone walks this earth with the same level of confidence. My impoverished friends know only too well the burning shame of being kicked out of some place, or lectured loudly about their role in society. Or shut down, told off, or simply ignored. So, is it any wonder that they dare not enter? Is it a surprise that they dare not ask for what they need? 

How can those of us with privilege and access, share that with others? How can we challenge the systems and attitudes that keep the poor locked out?

Lesson #4: Predators take Advantage

Being poor means less money, and less money means less options. And there are plenty of people willing to take advantage of that fact.

For example, poor folks rarely buy in bulk and thus can't get the same savings we do. In fact they can only afford to buy in tiny amounts - from tiny little shampoo sachets instead of bottles - to little packets of salt instead of a proper salt dispenser. So everything ends up costing more. They might struggle to afford the connection fee for electricity or water, so they are forced to buy from a middleman at an exorbitant mark-up.

Less options. Higher costs.

One of the old women I got to know would borrow $20 from a loan shark at the start of each month to buy stock for her little shop (really just a few things she sold from the window of her shack). Each and every day throughout the month, she would pay the loan shark $1, a total of $30 a month on average.  She was paying $10 interest a month on a $20 loan!

How can we create more and better options for the poor so they won't constantly be stuck in this cycle of debt? How can we give them the same access to cost-savings that we have?

Lesson #5: Resilience is STILL Everywhere

These challenges add a very real set of obstacles to entrepreneurship in the slum. They affect the way people make a living and try to do business. BUT, despite these difficulties we see people rising up and scraping together an income every day. 

My friend selling flip flops goes to the market every day despite the fact she has no transport and has to rely on family and friends to give her a ride on the back of a motorbike (along with her enormous bag of flip-flops).

She sells flip-flops every day despite the fact that she is chased away and ridiculed by the authorities. 

She has incredible resilience.

When Jesus saw the elderly widow with her 2 pennies, literally all she had, He pointed out her faith and strength. He saw her resilience. And then Jesus drew a contrast to the rich Pharisees who gave out of their abundance.

Let's celebrate and nurture entrepreneurship wherever we might find it, but recognize that for those with privilege it is often entrepreneurship "out of our abundance" - or the abundance of our support network. So smugness and self-congratulations are not OK.

Let's do everything we can to nurture and celebrate entrepreneurship that emerges from the midst of struggle.

As you work hard to make a living, how could you extend more opportunities and access to those with less? To get you started, here is a list of 5 things you can do to help:

  1. Extend your network of contacts and friends to someone who is less connected, by making introductions whenever you can.
  2. Use your privilege to advocate whenever you see that access to certain places or institutions is denied to the poor.
  3. Share the financial education you have received with someone who has missed out. 
  4. Create products and services that meet the needs of the poor without exploiting them.
  5. Find ways to redistribute your own wealth and resources, so that those with less can get loans and assistance.

How have you found ways to help people with less access and less privilege? What would you add to the list above?